Israel intercepted and destroyed a rocket fired from Egyptian territory at the Red Sea town of Eilat overnight, Israeli public radio said Tuesday.
A jihadist group had earlier said they fired a Grad rocket at Eilat in retaliation for an alleged Israeli air raid.
An army spokeswoman confirmed the attempted rocket attack and its interception by an Iron Dome battery near Eilat to AFP, but did not say where the rocket originated.
Last month, Israel deployed a battery of its Iron Dome missile defence system near Eilat, which is next to the border with Egypt's restive Sinai Peninsula.
The Mujahideen Shura Council, an armed Al-Qaeda-linked group, said in a statement published on a jihadist forum its fighters fired the rocket at 1:00 am (2300 GMT Monday).
The rocket, fired from the Sinai, was "a quick response to the last crime by the Jews after one of their drones bombed the Sinai peninsula killing four mujahedeen" on Friday, the statement said.
An Egyptian militant group, Ansar Beit al-Maqdis, said four of its members belonging to Sinai Bedouin tribes were killed by Israeli drones on Friday.
The group accused the Egyptian army of coordinating the attack with Israel, and threatened more strikes against the Jewish state.
"How can the Egyptian army allow the Zionist unmanned planes to cross into Egyptian territory," the statement asked.
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Egypt's military denied the allegations, with army spokesman Colonel Ahmed Aly saying there was "no truth whatsoever to any Israeli strikes inside Egyptian territory.
"The claim that there is Egyptian and Israeli coordination on the matter is utterly baseless."
Officials told AFP the strike came from the Egyptian military, as part of their campaign to curtail a surge in violence and rein in militant activity in the lawless Sinai.
Witnesses said Egyptian military helicopters hovered above the site after the blasts.
Israel's Environment Minister Amir Peretz told army radio on Tuesday he hoped "cooperation between Israeli and Egyptian security services will bear fruit and allow us to maintain calm in the region."
Militants based mainly in north Sinai near Israel's border have escalated attacks on Egyptian security forces and other targets since July 3, when the army ousted Islamist president Mohamed Morsi and installed a new government in Cairo.
But the army has been reluctant to confront the militants inside towns in order not to provoke the tight-knit tribes, military sources say.
The army said it had killed nearly 70 "terrorists" since Morsi's ouster.
Eilat has been the target of attacks in the past.
In April, it was struck by rocket fire from the Sinai, and debris from a rocket that hit northern Eilat on July 4 was found days later.